MNI BRIEF: Sweden Financial Regulator Sees Stability Risks Up

Sweden is seeing increasingly elevated financial stability risks, Sweden's financial regulator Finansinspektionen (FI), highlights in its latest report, as rising debt interest costs feed through to lower household demand and overly leveraged commercial real estate companies need to lower debt levels as property prices decline.

FI called on property companies to reduce debt and it foresaw Swedish households rising debt interest costs hitting consumption and reducing economic activity ahead. While the marked fall in risk appetite should reduce financial stability in the medium term, in the short term it is pushing them higher, FI warned.

Bond market liquidity is still low and poor price setting mechanisms could result in longer term stability risks, FI warned. The Riksbank has front-loaded rate hikes in the face of the inflation shock, but now appears to be coming to the end of its tightening. with the FI report setting out how vulnerable the economy is to a higher rate environment. (MNI RIKSBANK WATCH: 75bps Hike As Rate Peak Nears)